News

Beauvais, France

DULUTH, Ga.--(BUSINESS WIRE)--Jul. 27, 2017--
AGCO, Your Agriculture Company (NYSE:AGCO), a worldwide manufacturer and
distributor of agricultural equipment, reported net sales of
approximately $2.2 billion for the second quarter of 2017, an increase
of approximately 8.5% compared to the second quarter of 2016. Reported
net income was $1.14 per share for the second quarter of 2017, and
adjusted net income, excluding restructuring expenses, was $1.15 per
share. These results compare to reported net income of $0.61 per share
and adjusted net income, excluding restructuring expenses and a non-cash
deferred income tax adjustment, of $1.02 per share for the second
quarter of 2016. Excluding unfavorable currency translation impacts of
approximately 2.0%, net sales in the second quarter of 2017 increased
approximately 10.5% compared to the second quarter of 2016.

Net sales for the first six months of 2017 were approximately $3.8
billion, an increase of approximately 6.7% compared to the same period
in 2016. Excluding unfavorable currency translation impacts of
approximately 1.5%, net sales for the first six months of 2017 increased
approximately 8.2% compared to the same period in 2016. For the first
six months of 2017, reported net income was $1.02 per share and adjusted
net income, excluding restructuring expenses and a non-cash expense
related to waived stock compensation, was $1.13 per share. These results
compare to reported net income of $0.70 per share and adjusted net
income, excluding restructuring expenses and a non-cash deferred income
tax adjustment, of $1.12 per share for the first six months of 2016.

“AGCO achieved sales and earnings improvement in the second quarter in
the midst of challenging market conditions,” stated Martin Richenhagen,
AGCO’s Chairman, President and Chief Executive Officer. “Higher demand
and margins in our Europe/Middle East region are driving our improved
results and increased outlook for the full year. AGCO’s sales and
earnings growth also reflect the benefit of our efforts to reduce
expenses, improve the efficiency of our factories and launch new
products. While there continues to be weakness in our key markets, we
will remain focused on improving our competitive position and expanding
our margins by investing in new technologies, productivity enhancements
and new market development.”

Market Update

Industry Unit Retail Sales

Six months ended June 30, 2017

Tractors

Change from

Prior Year Period

Combines

Change from

Prior Year Period

North America(1)

(3)%

3%

South America

36%

28%

Western Europe

(2)%

(11)%

(1)

Excludes compact tractors.

“Commodity prices have not changed materially from last year, while
difficult weather conditions could impact yields across many of the key
U.S. crop production states,” continued Mr. Richenhagen. “Despite these
challenging early growing conditions, the USDA is estimating global
grain inventories will rise during 2017, maintaining pressure on
commodity prices. After multiple years of decline, global industry
demand is continuing to stabilize as some farmers are returning to more
normal equipment replacement schedules. In the first half of 2017, North
America industry sales were down due to ongoing weakness in the row crop
sector. Industry sales of high-horsepower tractors, hay equipment and
grain storage and handling equipment were below last year’s levels. Full
year 2017 North American industry demand is also expected to be down
compared to 2016. Industry retail sales in Western Europe were down
modestly in the first six months of 2017. Low levels of demand from the
arable farming segment are being partially offset by more favorable
conditions for dairy and livestock producers. Sales declined most
significantly in France from high levels in the first half of 2016,
which were stimulated by tax incentives. Growth in the United Kingdom,
Spain and Italy offset most of the decline in the French market. For the
full year of 2017, demand in Western Europe is expected to be relatively
flat compared to 2016. Industry retail sales in South America increased
during the first six months of 2017 as demand in Brazil grew strongly
from depressed first-half levels experienced last year. More supportive
government policies in Argentina continue to stimulate industry growth.
Full year 2017 industry demand in South America is expected to be up,
while industry sales in the last six months are expected to be
relatively flat compared to 2016. Looking past the current operating
environment, our long-term view remains optimistic, with expanding
demand for grain supporting farm economics and healthy growth in our
industry.”

Regional Results

AGCORegional Net Sales (in millions)

Three Months Ended June 30,

2017

2016

%changefrom2016

% changefrom 2016 dueto currencytranslation(1)

% change from2016 due toacquisitions(1)

North America

$

478.8

$

498.9

(4.0)%

(0.8)%

0.6%

South America

251.9

203.4

23.8%

5.5%

0.5%

Europe/Middle East (2)

1,269.5

1,168.0

8.7%

(3.8)%

3.3%

Asia/Pacific/Africa (2)

165.0

125.3

31.7%

(2.5)%

3.0%

Total

$

2,165.2

$

1,995.6

8.5%

(2.0)%

2.3%

Six Months Ended June 30,

2017

2016

%changefrom2016

% changefrom 2016 dueto currencytranslation(1)

% change from2016 due toacquisitions(1)

North America

$

861.4

$

907.3

(5.1)%

(0.7)%

1.0%

South America

474.1

347.6

36.4%

12.7%

0.5%

Europe/Middle East (2)

2,162.0

2,067.1

4.6%

(4.2)%

3.3%

Asia/Pacific/Africa (2)

295.3

232.9

26.8%

(1.8)%

4.8%

Total

$

3,792.8

$

3,554.9

6.7%

(1.5)%

2.6%

(1)See appendix for additional
disclosures

(2)Effective January 1, 2017, AGCO
realigned its regional structure as reflected in the table above.
A schedule showing restated segment results for 2016 is available
on AGCO’s website at www.agcocorp.com
on the “Company/Investors” page.

North America

Net sales in AGCO’s North America region decreased 4.4% in the first six
months of 2017 compared to the same period of 2016, excluding the
negative impact of currency translation. Dealer inventory reduction
efforts and softer industry demand contributed to lower sales. Sales
declines were most significant in hay tools and GSI grain equipment.
These declines were partially offset by increased sales of mid-range and
high horsepower tractors. Income from operations for the first six
months of 2017 improved approximately $2.6 million compared to the same
period in 2016. The benefit of improved factory productivity and expense
reduction efforts were mostly offset by lower sales and production
volumes.

South America

South American net sales increased 23.6% in the first six months of 2017
compared to the first six months of 2016, excluding the impact of
favorable currency translation. Significant sales increases in Brazil
and Argentina produced most of the growth. Income from operations
improved approximately $4.4 million for the first six months of 2017
compared to the same period in 2016, as the benefit of higher sales and
production volumes was mostly offset by material cost inflation and the
costs associated with transitioning to the new tier 3 emission
technology.

Europe/Middle East

AGCO’s EME net sales increased 8.8% in the first six months of 2017
compared to the same period in 2016, excluding unfavorable currency
translation impacts. Acquisitions benefited sales by approximately 3.3%
during the first six months compared to the same period last year.
Higher sales in Germany, the United Kingdom and Italy were partially
offset by sales declines in France. Income from operations improved
approximately $26.1 million for the first six months of 2017, compared
to the same period in 2016, due to the benefit of higher sales and
margin improvement.

Asia/Pacific/Africa

Net sales in AGCO’s Asia/Pacific/Africa region, excluding the negative
impact of currency translation, increased 28.6% in the first six months
of 2017 compared to the same period in 2016 due primarily to increased
sales in China and Australia. Income from operations improved
approximately $6.5 million in the first six months of 2017, compared to
the same period in 2016, due to higher sales and production levels.

Outlook

AGCO’s net sales for 2017 are expected to reach $8.0 billion reflecting
improved sales volumes, positive pricing and acquisition impacts. Gross
and operating margins are expected to improve from 2016 levels due to
higher sales along with the benefits resulting from the Company’s cost
reduction initiatives. Based on these assumptions, 2017 earnings per
share are targeted at approximately $2.89 on a reported basis, or
approximately $3.00 on an adjusted basis which excludes restructuring
expenses and the non-cash expense related to waived stock compensation.

* * * * *

AGCO will be hosting a conference call with respect to this earnings
announcement at 10:00 a.m. Eastern Time on Thursday, July 27, 2017. The
Company will refer to slides on its conference call. Interested persons
can access the conference call and slide presentation via AGCO’s website
at www.agcocorp.com
in the “Events” section on the “Company/Investors” page of our website.
A replay of the conference call will be available approximately two
hours after the conclusion of the conference call for twelve months
following the call. A copy of this press release will be available on
AGCO’s website for at least twelve months following the call.

* * * * *

Safe Harbor Statement

Statements that are not historical facts, including the projections of
earnings per share, sales, industry demand, market conditions, commodity
prices, currency translation, farm income levels, margin levels,
investments in product and technology development, new product
introductions, restructuring and other cost reduction initiatives,
production volumes, tax rates and general economic conditions, are
forward-looking and subject to risks that could cause actual results to
differ materially from those suggested by the statements. The following
are among the factors that could cause actual results to differ
materially from the results discussed in or implied by the
forward-looking statements.

Our financial results depend entirely upon the agricultural industry,
and factors that adversely affect the agricultural industry generally,
including declines in the general economy, increases in farm input
costs, lower commodity prices, lower farm income and changes in the
availability of credit for our retail customers, will adversely affect
us.

A majority of our sales and manufacturing take place outside the
United States, and, as a result, we are exposed to risks related to
foreign laws, taxes, economic conditions, labor supply and relations,
political conditions and governmental policies. These risks may delay
or reduce our realization of value from our international operations.

Most retail sales of the products that we manufacture are financed,
either by our joint ventures with Rabobank or by a bank or other
private lender. Our joint ventures with Rabobank, which are controlled
by Rabobank and are dependent upon Rabobank for financing as well,
finance 40% to 50% of the retail sales of our tractors and combines in
the markets where the joint ventures operate. Any difficulty by
Rabobank to continue to provide that financing, or any business
decision by Rabobank as the controlling member not to fund the
business or particular aspects of it (for example, a particular
country or region), would require the joint ventures to find other
sources of financing (which may be difficult to obtain), or us to find
another source of retail financing for our customers, or our customers
would be required to utilize other retail financing providers. As a
result of the recent economic downturn, financing for capital
equipment purchases generally has become more difficult in certain
regions and in some cases, can be expensive to obtain. To the extent
that financing is not available or available only at unattractive
prices, our sales would be negatively impacted.

Both AGCO and our finance joint ventures have substantial account
receivables from dealers and end customers, and we would be adversely
impacted if the collectability of these receivables was not consistent
with historical experience; this collectability is dependent upon the
financial strength of the farm industry, which in turn is dependent
upon the general economy and commodity prices, as well as several of
the other factors listed in this section.

We have experienced substantial and sustained volatility with respect
to currency exchange rate and interest rate changes, including
uncertainty associated with the Euro, which can adversely affect our
reported results of operations and the competitiveness of our products.

Our success depends on the introduction of new products, particularly
engines that comply with emission requirements, which requires
substantial expenditures.

Our production levels and capacity constraints at our facilities,
including those resulting from plant expansions and systems upgrades
at our manufacturing facilities, could adversely affect our results.

Our expansion plans in emerging markets, including establishing a
greater manufacturing and marketing presence and growing our use of
component suppliers, could entail significant risks.

We depend on suppliers for components, parts and raw materials for our
products, and any failure by our suppliers to provide products as
needed, or by us to promptly address supplier issues, will adversely
impact our ability to timely and efficiently manufacture and sell
products. We also are subject to raw material price fluctuations,
which can adversely affect our manufacturing costs.

We face significant competition, and if we are unable to compete
successfully against other agricultural equipment manufacturers, we
would lose customers and our net sales and profitability would decline.

We have a substantial amount of indebtedness, and, as result, we are
subject to certain restrictive covenants and payment obligations that
may adversely affect our ability to operate and expand our business.

Further information concerning these and other factors is included in
AGCO’s filings with the Securities and Exchange Commission, including
its Form 10-K for the year ended December 31, 2016. AGCO disclaims any
obligation to update any forward-looking statements except as required
by law.

* * * * *

About AGCO

AGCO (NYSE: AGCO) is a global leader in the design, manufacture and
distribution of agricultural solutions and supports more productive
farming through its full line of equipment and related services. AGCO
products are sold through five core brands, Challenger®, Fendt®, GSI®,
Massey Ferguson® and Valtra®, supported by Fuse® precision technologies
and farm optimization services, and are distributed globally through a
combination of over 3,000 independent dealers and distributors in more
than 150 countries. Founded in 1990, AGCO is headquartered in Duluth,
GA, USA. In 2016, AGCO had net sales of approximately $7.4 billion. For
more information, visit http://www.AGCOcorp.com. For
company news, information and events, please follow us on Twitter:
@AGCOCorp. For financial news on Twitter, please follow the hashtag
#AGCOIR.

The Company recorded approximately $4.8 million of accelerated stock
compensation expense during the three months ended March 31, 2017
associated with a waived stock award declined by the Company’s CEO.

2.RESTRUCTURING EXPENSES

From 2014 through 2017, the Company announced and initiated several
actions to rationalize employee headcount at various manufacturing
facilities located in Europe, China, Brazil, Argentina and the United
States, as well as various administrative offices located in Europe,
Brazil, China and the United States in order to reduce costs in response
to softening global market demand and lower production volumes. The
aggregate headcount reduction was approximately 2,750 employees in 2014,
2015 and 2016. The Company had approximately $15.3 million of severance
and related costs accrued as of December 31, 2016. During the three and
six months ended June 30, 2017, the Company recorded an additional $0.4
million and $5.5 million, respectively, of severance and related costs
associated with further rationalizations primarily in the United States,
South America and Europe, associated with the termination of
approximately 220 employees, and paid approximately $8.3 million of
severance and associated costs. The remaining $13.4 million of accrued
severance and other related costs as of June 30, 2017, inclusive of
approximately $0.9 million of positive foreign currency translation
impacts, are expected to be paid primarily during 2017.

3.INDEBTEDNESS

Indebtedness at June 30, 2017 and December 31, 2016 consisted of the
following:

June 30, 2017

December 31, 2016

1.056% Senior term loan due 2020

$

228.4

$

211.0

Credit facility, expires 2020

428.7

329.2

Senior term loans due 2021

342.6

316.5

5⅞% Senior notes due 2021

305.9

306.6

Senior term loans due between 2019 and 2026

428.2

395.6

Other long-term debt

133.4

141.6

Debt issuance costs

(4.7

)

(5.1

)

1,862.5

1,695.4

Less: Current portion of other long-term debt

(90.4

)

(85.4

)

Total indebtedness, less current portion

$

1,772.1

$

1,610.0

4.INVENTORIES

Inventories at June 30, 2017 and December 31, 2016 were as follows:

June 30, 2017

December 31, 2016

Finished goods

$

744.1

$

589.3

Repair and replacement parts

578.9

532.5

Work in process

189.2

113.8

Raw materials

373.2

279.2

Inventories, net

$

1,885.4

$

1,514.8

5.ACCOUNTS RECEIVABLE SALES AGREEMENTS

At June 30, 2017 and December 31, 2016, the Company had accounts
receivable sales agreements that permit the sale, on an ongoing basis,
of a majority of its wholesale receivables in North America, Europe and
Brazil to its U.S., Canadian, European and Brazilian finance joint
ventures. As of both June 30, 2017 and December 31, 2016, the
receivables sold under the U.S., Canadian, European and Brazilian
accounts receivable sales agreements were approximately $1.1 billion.

Losses on sales of receivables associated with the accounts receivable
financing facilities discussed above, reflected within “Other expense,
net” in the Company’s Condensed Consolidated Statements of Operations,
were approximately $8.9 million and $17.2 million during the three and
six months ended June 30, 2017, respectively. Losses on sales of
receivables associated with the accounts receivable financing facilities
discussed above, reflected within “Other expense, net” in the Company’s
Condensed Consolidated Statements of Operations, were approximately $4.7
million and $9.5 million during the three and six months ended June 30,
2016, respectively.

The Company’s finance joint ventures in Europe, Brazil and Australia
also provide wholesale financing directly to the Company’s dealers. As
of June 30, 2017 and December 31, 2016, these finance joint ventures had
approximately $53.3 million and $41.5 million, respectively, of
outstanding accounts receivable associated with these arrangements. In
addition, the Company sells certain trade receivables under factoring
arrangements to other financial institutions around the world.

6.NET INCOME PER SHARE

A reconciliation of net income attributable to AGCO Corporation and
subsidiaries and weighted average common shares outstanding for purposes
of calculating basic and diluted net income per share for the three and
six months ended June 30, 2017 and 2016 is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

2017

2016

2017

2016

Basic net income per share:

Net income attributable to AGCO Corporation and subsidiaries

$

91.5

$

50.3

$

81.4

$

58.1

Weighted average number of common shares outstanding

79.5

82.0

79.5

82.5

Basic net income per share attributable to AGCO Corporation and
subsidiaries

Weighted average number of common shares and common share
equivalents outstanding for purposes of computing diluted net
income per share

80.1

82.1

80.1

82.6

Diluted net income per share attributable to AGCO Corporation and
subsidiaries

$

1.14

$

0.61

$

1.02

$

0.70

7.SEGMENT REPORTING

Effective January 1, 2017, the Company modified its system of reporting,
resulting from changes to its internal management and organizational
structure, which changed its reportable segments from North America;
South America; Europe/Africa/Middle East; and Asia/Pacific to North
America; South America; Europe/Middle East; and Asia/Pacific/Africa. The
Asia/Pacific/Africa reportable segment includes the regions of Africa,
Asia, Australia and New Zealand, and the Europe/Africa/Middle East
segment no longer includes certain markets in Africa. Effective January
1, 2017, these reportable segments are reflective of how the Company’s
chief operating decision marker reviews operating results for the
purposes of allocating resources and assessing performance.

The Company’s four reportable segments distribute a full range of
agricultural equipment and related replacement parts. The Company
evaluates segment performance primarily based on income from operations.
Sales for each segment are based on the location of the third-party
customer. The Company’s selling, general and administrative expenses and
engineering expenses are charged to each segment based on the region and
division where the expenses are incurred. As a result, the components of
income from operations for one segment may not be comparable to another
segment. Segment results for the three and six months ended June 30,
2017 and 2016 are as follows:

Three Months Ended June 30,

NorthAmerica

SouthAmerica

Europe/Middle East

Asia/Pacific/Africa

Consolidated

2017

Net sales

$

478.8

$

251.9

$

1,269.5

$

165.0

$

2,165.2

Income from operations

23.0

2.6

172.4

5.7

203.7

2016

Net sales

$

498.9

$

203.4

$

1,168.0

$

125.3

$

1,995.6

Income from operations

23.6

—

143.5

2.0

169.1

Six Months Ended June 30,

NorthAmerica

SouthAmerica

Europe/Middle East

Asia/Pacific/Africa

Consolidated

2017

Net sales

$

861.4

$

474.1

$

2,162.0

$

295.3

$

3,792.8

Income from operations

25.5

4.8

237.7

7.8

275.8

2016

Net sales

$

907.3

$

347.6

$

2,067.1

$

232.9

$

3,554.9

Income from operations

22.9

0.4

211.6

1.3

236.2

A reconciliation from the segment information to the consolidated
balances for income from operations is set forth below:

Three Months Ended June 30,

Six Months Ended June 30,

2017

2016

2017

2016

Segment income from operations

$

203.7

$

169.1

$

275.8

$

236.2

Corporate expenses

(31.3

)

(31.3

)

(57.9

)

(61.0

)

Stock compensation expense

(9.8

)

(5.7

)

(21.2

)

(10.8

)

Restructuring expenses

(0.4

)

(2.1

)

(5.5

)

(4.0

)

Amortization of intangibles

(13.8

)

(11.4

)

(27.2

)

(22.4

)

Consolidated income from operations

$

148.4

$

118.6

$

164.0

$

138.0

RECONCILIATION OF NON-GAAP MEASURES

This earnings release discloses adjusted income from operations,
adjusted net income and adjusted net income per share, each of which
exclude amounts that are typically included in the most directly
comparable measure calculated in accordance with U.S. generally accepted
accounting principles (“GAAP”). A reconciliation of each of those
measures to the most directly comparable GAAP measure is included below.

The following is a reconciliation of reported income from operations,
net income and net income per share to adjusted income from operations,
net income and net income per share for the three and six months ended
June 30, 2017 and 2016 (in millions, except per share data):

Three Months Ended June 30,

2017

2016

Income FromOperations

Net Income(1)

Net IncomePer Share(1)

Income FromOperations

Net Income(1)

Net IncomePer Share(1)

As reported

$

148.4

$

91.5

$

1.14

$

118.6

$

50.3

$

0.61

Restructuring expenses (2)

0.4

0.3

0.01

2.1

1.7

0.02

Deferred income tax adjustment(3)

—

—

—

—

31.6

0.39

As adjusted

$

148.8

$

91.8

$

1.15

$

120.7

$

83.6

$

1.02

(1)

Net income and net income per share amounts are after tax.

(2)

The restructuring expenses recorded during the three months ended
June 30, 2017 and 2016 related primarily to severance costs
associated with the Company’s rationalization of certain U.S.,
European and South American manufacturing operations and various
administrative offices.

(3)

During the second quarter of 2016, the Company recorded a non-cash
adjustment to increase the valuation allowance on the U.S. deferred
income tax assets of approximately $31.6 million.

Six Months Ended June 30,

2017

2016

Income FromOperations

Net Income (1)

Net IncomePer Share (1)

Income FromOperations

Net Income (1)

Net IncomePer Share (1)

As reported

$

164.0

$

81.4

$

1.02

$

138.0

$

58.1

$

0.70

Restructuring expenses (2)

5.5

4.1

0.05

4.0

2.9

0.04

Non-cash expense related to waived stock compensation(3)

4.8

4.8

0.06

—

—

—

Deferred income tax adjustment(4)

—

—

—

—

31.6

0.38

As adjusted

$

174.3

$

90.3

$

1.13

$

142.0

$

92.6

$

1.12

(1)

Net income and net income per share amounts are after tax.

(2)

The restructuring expenses recorded during the six months ended June
30, 2017 and 2016 related primarily to severance costs associated
with the Company’s rationalization of certain U.S., European and
South American manufacturing operations and various administrative
offices.

(3)

The Company recorded approximately $4.8 million of accelerated stock
compensation expense during the three months ended March 31, 2017
associated with a waived award declined by the Company’s CEO.

(4)

During the second quarter of 2016, the Company recorded a non-cash
adjustment to increase the valuation allowance on the U.S. deferred
income tax assets of approximately $31.6 million.

The following is a reconciliation of targeted net income per share to
adjusted targeted net income per share for the year ended December 31,
2017:

Net Income Per Share (1)

As targeted

$

2.89

Restructuring expenses

0.05

Non-cash expense related to waived stock compensation

0.06

As adjusted targeted(2)

$

3.00

(1)

Net income per share amount is after tax.

(2)

The above reconciliation reflects adjustments to full year 2017
targeted net income per share based upon restructuring expenses
incurred during the six months ended June 30, 2017. Full year
restructuring expenses could differ based on future restructuring
activity.

The following table sets forth, for the three and six months ended
June 30, 2017, the impact to net sales of currency translation and
recent acquisitions by geographical segment (in millions, except
percentages):

AGCO is a global leader in the design, manufacture and distribution of agricultural solutions.

Through well-known brands including Challenger®, Fendt®, GSI®, Massey Ferguson® and Valtra®, AGCO Corporation delivers agricultural solutions to farmers worldwide through a full line of tractors, combine harvesters, hay and forage equipment, seeding and tillage implements, grain storage and protein production systems, as well as replacement parts.